The Near Distance

Oil and the Dollar

There is some disturbing news for the dollar in the news.  It seems that with the de-valuing of the dollar taking place through excessive borrowing and printing by our government, other nations are looking for ways to move away from the risk of a falling dollar.  As I have written before, there have been many calls for the replacement of the dollar as the world reserve currency, and now there is even more going on behind the scenes.

There has been some "secret" meetings taking place between Russia, China, Japan, and Brazil to work on a plan to end the pricing of oil in dollars. Business Week reports: "In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar. Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars."  See this article.

For those that don't know, in the 1970's Nixon took the American Dollar off the gold standard and instead forged a deal with oil producing countries that meant all oil would be priced in dollars in exchange for Americas help in protecting the oil.  So, ever since the 1970's the American Dollar has been the king currency of the world since it had to be used for the purchase of oil.  This is beginning to change, and the effect it has on the dollar will be dramatic.  

Business week states: "The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power – along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system – which has prompted the latest discussions involving the Gulf states.

The G7 is also aware of the problem with the U.S. Dollar and will effectively abandon it according to forbes.com.  "The Group of Seven will let the dollar fall.  The heated climate before the Istanbul meeting led some to expect global policymakers to take a stand, but despite the strong tone, Andrew Wilkinson, senior market analyst at Interactive Brokers, said it was short on action. "It invites investors to test the dollar's lines of resistance in order to see what response, if any, might be forthcoming in the event of a further fall in the value of the dollar," Wilkinson said."  Article here.

I don't want to be a pessimist, but the facts and numbers I see point to an American Dollar crisis coming.  It is hard to tell when all this could happen, it may just take one big event in the middle east.  The countries mentioned above want oil to be completely out of the dollar by 2018, but many speculate this could happen much sooner.  You should do your homework and learn the truth about where our nation is financially.  America is about to head down a path of enormous economic struggle that very well may cause the dollar to collapse unless out of control spending is stopped right now.  Will you get blindsided by inflation and possibly even hyper-inflation?  Jerry Robinson is a great resource for learning and keeping up if you are interested...http://www.jrmi.org/